US Stocks Little Changed; Energy, Materials Decline

DonnaKardos

("=US Stocks Little Changed; Energy, Materials Decline," at 9:54 a.m. EDT, misstated the expectations for both headline CPI and "core" CPI. The correct version follows. The errors also appeared in articles at 11:17 a.m. EDT and 12:05 p.m. EDT.)

NEW YORK (MarketWatch) -- U.S. stocks bounced between small gains and losses Wednesday morning as the first drop in U.S. consumer prices in more than a year raised concerns that deflation could be in the offing, while worries persisted over the fragility of Europe's economy.

The Dow Jones Industrial Average was recently down 30 points, or 0.3%, to 10463, in early trading. Boeing led the measure's declines with a drop of 1.4% while Alcoa was also weak, down 1.3%, as metals futures fell.

Just a handful of the Dow's components were in the black, led by Hewlett-Packard, which rose 2.6%. The company's fiscal second-quarter profit grew 28% on higher world-wide sales and profit growth in its core personal-computer business, where shipments jumped. The report helped lift the Dow's other technology components. Intel climbed 0.7%, Cisco rose 0.4% and International Business Machines advanced 0.3%.

The Nasdaq Composite gained 0.2%. The Standard & Poor's 500 index was up 0.1%.The materials and energy sectors led the measure's declines as commodities fell. The technology sector gained.

Wednesday is the first day of Germany's ban on some short-selling. The announcement of the ban helped exacerbate losses in U.S. stocks Tuesday afternoon, with the Dow closing down nearly 115 points, as it served to reinforce, rather than dispel, worries over the health of European governments and the lenders that possess their debt.

As the ban took effect Wednesday morning, stocks in Europe dropped sharply, particularly financials such as Barclays that aren't subject to the ban, while losses for German financials including Deutsche Bank were limited. Barclays was down 4.2% in London while Deutsche Bank was down 1.1% in Germany.

The euro fell to a fresh four-year low before bouncing back on Wednesday, as talk swirled of possible central bank intervention. In recent trading, the euro was at $1.2308. The U.S. Dollar Index, reflecting the U.S. currency against a basket of six others, slipped 0.4%. Treasurys also fell, pushing the yield on the 10-year note up to 3.38%. Crude-oil futures dropped and gold futures also slumped.

Wednesday morning, the Labor Department said the seasonally-adjusted consumer price index fell 0.1% last month, the first drop since March 2009, as energy prices fell. Economists had expected an unchanged reading. In March, consumer prices were up an unrevised 0.1%.

Underlying consumer prices, which strip out volatile energy and food items and are closely watched by the Federal Reserve, were unchanged for the second month in a row, versus expectations for a 0.1% increase.

"Given the scale of fiscal consolidation ahead, the weak credit environment, relatively high productivity and high unemployment the risk is that this inflation measure falls even further and we could head towards deflation territory," ING Financial Markets told clients in a research note.

Among U.S. stocks in focus, Deere climbed 2%. The farm-equipment giant's fiscal second-quarter earnings rose 16% on strong demand for its large farm machinery. Adjusted earnings, excluding a health-care-related charge, rose even more, smashing analysts' forecasts on a surge in margins. The company also raised its current-year earnings forecast.

Target slipped 0.7% despite the retailer's much-improved first-quarter profit, which was assisted by better sales of more profitable merchandise like apparel and an improved credit card operation. The discount retailer indicated consumers were willing to spend on discretionary merchandise during the period, which allowed the company to exceed its own expectations by a considerable amount.

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